Official Answer Key & Detailed Solution
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Correct Answer: Option (A) — 1 and 4 only
Concept & Option Breakdown
Standard Reference VerifiedStatement 1 is correct: When the price of a substitute good increases, consumers substitute away from it, increasing the demand for the good in question. Statement 2 is incorrect: An increase in the price of a complementary good reduces the demand for both goods. Statement 3 is incorrect: For an inferior good, demand decreases as consumer income increases. Statement 4 is correct: By the law of demand, a fall in the price of a good leads to an increase in its quantity demanded.
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